Urban One(UONE) - 2021 Q4 - Annual Report

Table of Contents Certain Definitions Definitions of Key Terms Key terms like LMA, TBA, broadcast and digital operating income, and margin are defined, along with data sources for industry metrics - An LMA or TBA is an agreement where an FCC licensee makes air time available for a fee to another party, who then provides programming and sells advertising[8] - Broadcast and digital operating income is a non-GAAP measure used by management to evaluate core operating segments, reflecting performance apart from fixed asset expenses, taxes, investments, impairment, debt, corporate overhead, and stock-based compensation[9] - Broadcast and digital operating income margin represents broadcast and digital operating income as a percentage of net revenue, providing insight into profitability across all four segments (radio broadcasting, Reach Media, digital, and cable television)[10] Cautionary Note Regarding Forward-Looking Statements Forward-Looking Statements and Associated Risks This section details forward-looking statements and risks, including economic volatility, high leverage, FCC regulations, and competition - Forward-looking statements are not historical facts but reflect current expectations about future operations, results, and events, and are subject to risks and uncertainties beyond the company's control[13] - Key risks include the impact of the COVID-19 pandemic on business and advertisers, economic volatility, high leverage, local economic fluctuations, risks associated with gaming investments, FCC regulations, increased competition, potential impairment charges, and technology disruptions[13][17] PART I Item 1. Business Urban One is an urban-focused multi-media company with core radio broadcasting, cable TV, digital platforms, and a casino interest, facing COVID-19 impacts and intense competition - Urban One is an urban-oriented multi-media company targeting African-American and urban consumers, with core radio broadcasting and diversified interests in cable TV, syndicated radio, digital platforms, and a gaming resort[19] - As of December 31, 2021, the company owned/operated 64 broadcast stations (54 FM/AM, 8 HD, 2 low power TV) in 13 of the most populous African-American markets in the U.S[19][33] - The COVID-19 pandemic negatively impacted revenue sources in 2020 and 2021, particularly the radio segment due to reduced advertiser spending and shifts in consumer behavior[21] - In 2021, the company completed an asset exchange with Audacy, Inc., acquiring Charlotte stations and transferring St. Louis, Philadelphia, and Washington, DC stations, and received a $7.5 million PPP loan[25][26] - In January 2021, Urban One closed an offering of $825 million in 7.375% Senior Secured Notes due 2028, using proceeds to repay existing debt facilities[27][28] Net Revenue Contribution by Segment (2021) | Segment | Percentage of Net Revenue | | :---------------------- | :------------------------ | | Radio broadcasting | 31.8 % | | Reach Media | 10.5 % | | Digital | 13.6 % | | Cable television | 44.9 % | | Corporate/eliminations | (0.8)% | Overview Provides a general introduction to the company's business and strategic focus Recent Developments Details significant recent events and strategic changes impacting the company Segments Describes the company's various operating segments and their contributions Our Radio Station Portfolio, Strategy and Markets Outlines the company's radio station holdings, market strategy, and geographic presence Radio Advertising Revenue Discusses the sources and trends of revenue generated from radio advertising Cable Television, Reach Media and Digital Segments, Strategy and Sources of Revenue and Income Explains the strategies and revenue streams for cable TV, Reach Media, and digital segments Competition Analyzes the competitive landscape across all of the company's media operations Federal Antitrust Laws Addresses the implications of federal antitrust regulations on the company's business activities Federal Regulation of Radio Broadcasting Details the extensive FCC regulations governing the company's radio broadcasting operations Human Capital Provides information on the company's workforce and human resource management Environmental Discusses any environmental considerations relevant to the company's operations Corporate Governance Outlines the company's corporate governance structure and practices Internet Address and Internet Access to SEC Reports Provides information on the company's online presence and access to SEC filings Item 1A. Risk Factors This section details risks including COVID-19 impacts, high leverage, market concentration, intense competition, regulatory challenges, and governance issues - The COVID-19 pandemic has caused significant disruption, reducing advertising spend and impacting demand for broadcast radio, with continued fluctuations anticipated[95][96] - The company's high degree of leverage and cash commitments could limit its ability to finance strategic transactions or respond to market changes[100] - A substantial portion of radio segment revenue (53.8% in 2021) comes from four markets (Houston, Washington, DC, Atlanta, Baltimore) and Reach Media, making the company vulnerable to adverse conditions in these areas[109] - The media industry is highly competitive, and the company faces intense competition for audiences and advertising revenue across all its segments, including from other radio stations, broadcast/cable TV, and digital platforms[49][110] - FCC regulations, including media ownership limits and indecency rules, could restrict acquisitions, affect operations, and lead to sanctions or increased costs[138][139] - The Chairperson and CEO hold over 75% of the outstanding voting power, controlling management and policy decisions, which may conflict with other stockholders' interests[154] Risks Related to Our Business and Industry Discusses risks inherent to the company's business model and the broader media industry Risks Related to the Nature and Operations of Our Business Details operational risks, including content acceptance, royalties, and technological changes Certain Regulatory Risks Outlines specific regulatory challenges, particularly those from the FCC Unique Risks Related to Our Cable Television Segment Addresses risks specific to the company's cable television operations Unique Risks Related to Our Capital Structure Covers risks associated with the company's capital structure and ownership control Item 1B. Unresolved Staff Comments There are no unresolved staff comments to report - No unresolved staff comments[157] Item 2. Properties The company primarily leases offices, studios, and transmitter sites, owning most equipment, with no anticipated issues in property management - The company primarily leases office, studio, and transmitter/antenna sites, with lease terms typically 5-10 years[159] - Most equipment (transmitting antennae, transmitters, studio, office) is owned by the company and is in good condition, subject to security interests under the senior credit facility[160] Item 3. Legal Proceedings Urban One is occasionally involved in routine legal and administrative proceedings incidental to its business, but management believes the resolution of these matters will not have a material adverse effect on its financial condition or results of operations - The company is involved in routine legal and administrative proceedings, but management does not expect a material adverse effect on its financial position or results of operations[161] Item 4. Mine Safety Disclosure This item is not applicable to Urban One, Inc - Mine Safety Disclosure is not applicable[162] PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities This section details market prices for Class A and D common stock, stockholder numbers, and the company's dividend policy Class A Common Stock Price Range (2020-2021) | Year | Quarter | High ($) | Low ($) | | :--- | :------ | :------- | :------ | | 2021 | First | 8.87 | 4.16 | | 2021 | Second | 20.95 | 4.56 | | 2021 | Third | 9.01 | 6.40 | | 2021 | Fourth | 11.43 | 4.47 | | 2020 | First | 2.21 | 1.06 | | 2020 | Second | 36.30 | 1.06 | | 2020 | Third | 19.63 | 3.43 | | 2020 | Fourth | 5.78 | 4.21 | Class D Common Stock Price Range (2020-2021) | Year | Quarter | High ($) | Low ($) | | :--- | :------ | :------- | :------ | | 2021 | First | 1.98 | 1.20 | | 2021 | Second | 6.45 | 1.68 | | 2021 | Third | 7.07 | 4.55 | | 2021 | Fourth | 7.40 | 3.15 | | 2020 | First | 2.00 | 0.87 | | 2020 | Second | 4.15 | 0.63 | | 2020 | Third | 2.37 | 0.85 | | 2020 | Fourth | 1.46 | 0.95 | - As of March 4, 2022, there were approximately 11,923 holders of Class A, 2 holders of Class B, 3 holders of Class C, and 5,907 holders of Class D Common Stock[168] - The company has not declared any cash dividends on common stock since May 1999 and intends to retain future earnings for business use[169] Price Range of Our Class A and Class D Common Stock Presents the historical high and low daily closing prices for the company's common stock classes Number of Stockholders Provides a count of stockholders for each class of the company's common stock Dividends Outlines the company's dividend policy and history of cash dividend declarations Item 6. Selected Financial Data This item is not required for smaller reporting companies - Selected Financial Data is not required for smaller reporting companies[170] Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This section analyzes Urban One's 2021 financial performance, highlighting revenue growth, 2022 strategy, liquidity, and critical accounting policies - Consolidated net revenue increased by 17.3% for the year ended December 31, 2021, compared to 2020, primarily due to mitigation of COVID-19 economic impacts and increased demand for minority-focused media[172][199] - The 2022 strategy aims to grow market share, improve audience share and revenue conversion in radio, and diversify revenue through its multimedia platform[172] Net Revenue by Source (2021 vs. 2020) | Net Revenue Source | 2021 (in thousands) | 2020 (in thousands) | $ Change (in thousands) | % Change | | :----------------- | :------------------ | :------------------ | :---------------------- | :------- | | Radio Advertising | $165,244 | $137,849 | $27,395 | 19.9 % | | Political Advertising | $3,494 | $22,484 | $(18,990) | (84.5)% | | Digital Advertising | $59,812 | $34,131 | $25,681 | 75.2 % | | Cable Television Advertising | $95,589 | $79,732 | $15,857 | 19.9 % | | Cable Television Affiliate Fees | $102,380 | $99,489 | $2,891 | 2.9 % | | Event Revenues & Other | $14,943 | $2,652 | $12,291 | 463.5 % | | Total Net Revenue | $441,462 | $376,337 | $65,125 | 17.3 % | Summary of Performance (2021 vs. 2020) | Metric | 2021 (in thousands) | 2020 (in thousands) | | :------------------------------------ | :------------------ | :------------------ | | Net revenue | $441,462 | $376,337 | | Broadcast and digital operating income | $179,234 | $163,891 | | Broadcast and digital operating income margin | 40.6 % | 43.5 % | | Adjusted EBITDA | $150,222 | $138,018 | | Net income (loss) attributable to common stockholders | $38,352 | $(8,113) | - Cash, cash equivalents, and restricted cash totaled approximately $152.2 million as of December 31, 2021[215] - The company refinanced its debt structure in January 2021 with $825 million in 2028 Notes, anticipating sufficient liquidity to meet debt service requirements[218][223] Overview Provides an introduction to the financial discussion, including key highlights and strategic direction Results of Operations Details the company's financial performance, analyzing revenue and expense trends Measurement of Performance Explains the key financial metrics used by management to evaluate business performance Summary of Performance Presents a concise overview of the company's financial results and key performance indicators Liquidity and Capital Resources Discusses the company's cash position, debt, and ability to fund operations and investments Critical Accounting Policies and Estimates Outlines significant accounting policies and estimates that require management judgment Capital and Commercial Commitments Details the company's contractual obligations and future capital expenditure plans Off-Balance Sheet Arrangements Describes any off-balance sheet transactions or arrangements impacting the company's financial position Item 7A. Quantitative and Qualitative Disclosure About Market Risk This item is not required for smaller reporting companies - Quantitative and Qualitative Disclosure About Market Risk is not required for smaller reporting companies[306] Item 8. Financial Statements and Supplementary Data The consolidated financial statements required by this item are filed separately on pages F-1 to F-55 of this report - Consolidated financial statements are filed on pages F-1 to F-55[307] Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure There are no changes in or disagreements with accountants on accounting and financial disclosure to report - No changes in or disagreements with accountants on accounting and financial disclosure[308] Item 9A. Controls and Procedures Management assessed disclosure controls and internal control over financial reporting as effective, with no material changes in 2021 - Disclosure controls and procedures were evaluated and deemed effective as of December 31, 2021[309][310] - Management concluded that internal control over financial reporting was effective as of December 31, 2021, based on the COSO criteria[312] - There were no changes in internal control over financial reporting that materially affected or are reasonably likely to materially affect internal control over financial reporting during the year ended December 31, 2021[313] Evaluation of disclosure controls and procedures Details the assessment of the company's disclosure controls and procedures by management Management's report on internal control over financial reporting Presents management's conclusion on the effectiveness of internal control over financial reporting Changes in internal control over financial reporting Reports any material changes in the company's internal control over financial reporting Item 9B. Other Information There is no other information to report under this item - No other information to report[314] PART III Item 10. Directors and Executive Officers of the Registrant Information regarding directors and executive officers is incorporated by reference from the company's proxy statement for the 2022 Annual Meeting of Stockholders - Information on directors and executive officers is incorporated by reference from the 2022 proxy statement[317] Item 11. Executive Compensation Information regarding executive compensation is incorporated by reference from the company's proxy statement - Executive compensation information is incorporated by reference from the proxy statement[318] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information regarding security ownership of certain beneficial owners and management is incorporated by reference from the company's proxy statement - Security ownership information is incorporated by reference from the proxy statement[319] Item 13. Certain Relationships and Related Transactions Information regarding certain relationships and related transactions is incorporated by reference from the company's proxy statement - Information on certain relationships and related transactions is incorporated by reference from the proxy statement[320] Item 14. Principal Accounting Fees and Services Information regarding principal accounting fees and services is incorporated by reference from the company's proxy statement - Principal accounting fees and services information is incorporated by reference from the proxy statement[321] PART IV Item 15. Exhibits and Financial Statement Schedules This section lists financial statements, supplementary data, and a comprehensive list of exhibits filed with the annual report - Financial statements, including consolidated balance sheets, statements of operations, comprehensive income (loss), changes in stockholders' equity, and cash flows, are submitted on pages F-1 to F-55[324] - A detailed list of exhibits, including organizational documents, debt instruments, and employment agreements, is provided[325][326][327][328][329][330][331][332] Financial Statements Lists the primary consolidated financial statements included in the report Exhibits and Financial Statements Provides a comprehensive listing of all exhibits and financial statements filed Item 16. Form 10-K Summary This item indicates that no Form 10-K Summary is provided - No Form 10-K Summary is provided[334] Signatures The report was signed by the CFO, Chairperson, CEO, and other directors of Urban One, Inc. on March 15, 2022 - The report was signed by Peter D. Thompson (CFO), Catherine L. Hughes (Chairperson), Alfred C. Liggins, III (CEO & President), and other directors on March 15, 2022[336][338][339] Report of Independent Registered Public Accounting Firm BDO USA, LLP, the independent registered public accounting firm, issued an unqualified opinion on Urban One, Inc.'s internal control over financial reporting as of December 31, 2021, based on COSO criteria. They also expressed an unqualified opinion on the consolidated financial statements for the years ended December 31, 2021 and 2020. Critical audit matters included the valuation of radio broadcasting licenses and radio goodwill impairment assessment, both sensitive to significant assumptions - BDO USA, LLP issued an unqualified opinion on the effectiveness of internal control over financial reporting as of December 31, 2021[340] - An unqualified opinion was also expressed on the consolidated financial statements for the years ended December 31, 2021 and 2020[341][348] - Critical audit matters included the valuation of radio broadcasting licenses and radio goodwill impairment assessment, due to the sensitivity of fair value estimates to assumptions like projected market share, operating profit margin, growth rates, and discount rates[353][354][356][357][358] Consolidated Balance Sheets The consolidated balance sheets show total assets increased from $1,195,487 thousand in 2020 to $1,261,108 thousand in 2021, driven by cash and broadcasting licenses Consolidated Balance Sheet Highlights (2021 vs. 2020) | Item | December 31, 2021 (in thousands) | December 31, 2020 (in thousands) | | :------------------------------------ | :------------------------------- | :------------------------------- | | Total current assets | $313,274 | $222,966 | | Goodwill | $223,402 | $223,402 | | Radio broadcasting licenses | $505,148 | $484,066 | | Total assets | $1,261,108 | $1,195,487 | | Total current liabilities | $106,471 | $106,909 | | Long-term debt, net | $818,616 | $818,924 | | Total liabilities | $989,973 | $995,888 | | Total stockholders' equity | $254,120 | $186,898 | Consolidated Statements of Operations The consolidated statements of operations show Urban One, Inc.'s financial performance for the years ended December 31, 2021, and 2020. The company reported a significant shift from a net loss of $8,113 thousand in 2020 to a net income of $38,352 thousand in 2021, driven by a 17.3% increase in net revenue and a substantial decrease in impairment charges Consolidated Statements of Operations Highlights (2021 vs. 2020) | Item | Year Ended December 31, 2021 (in thousands) | Year Ended December 31, 2020 (in thousands) | | :------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Net revenue | $441,462 | $376,337 | | Total operating expenses | $322,919 | $344,741 | | Operating income | $118,543 | $31,596 | | Interest expense | $65,702 | $74,507 | | Impairment of long-lived assets | $— | $84,400 | | Consolidated net income (loss) attributable to common stockholders | $38,352 | $(8,113) | | Basic Net Income (Loss) per share | $0.76 | $(0.18) | | Diluted Net Income (Loss) per share | $0.71 | $(0.18) | Consolidated Statements of Comprehensive Income (Loss) The consolidated statements of comprehensive income (loss) show that comprehensive income attributable to common stockholders was $38,352 thousand for the year ended December 31, 2021, a significant improvement from a comprehensive loss of $8,113 thousand in 2020 Consolidated Statements of Comprehensive Income (Loss) (2021 vs. 2020) | Item | Year Ended December 31, 2021 (in thousands) | Year Ended December 31, 2020 (in thousands) | | :------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Comprehensive income (loss) | $40,667 | $(6,569) | | Less: Comprehensive income attributable to noncontrolling interests | $2,315 | $1,544 | | Comprehensive income (loss) attributable to common stockholders | $38,352 | $(8,113) | Consolidated Statements of Changes in Stockholders' Equity Total stockholders' equity increased from $186,898 thousand in 2020 to $254,120 thousand in 2021, driven by net income and Class A stock issuance Consolidated Statements of Changes in Stockholders' Equity Highlights (2021 vs. 2020) | Item | December 31, 2021 (in thousands) | December 31, 2020 (in thousands) | | :------------------------------------ | :------------------------------- | :------------------------------- | | Total Stockholders' Equity (End of Period) | $254,120 | $186,898 | | Consolidated net income (loss) | $38,352 | $(8,113) | | Issuance of Class A common stock | $33,277 | $14,673 | | Repurchase of Class D common stock | $(970) | $(3,612) | | Adjustment of redeemable noncontrolling interests | $(4,399) | $(3,395) | Consolidated Statements of Cash Flows Net cash from operating activities increased to $80.2 million in 2021, with investing activities providing $1.7 million and financing activities using $3.5 million Consolidated Statements of Cash Flows Highlights (2021 vs. 2020) | Cash Flow Activity | Year Ended December 31, 2021 (in thousands) | Year Ended December 31, 2020 (in thousands) | | :------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Net cash flows provided by operating activities | $80,150 | $73,867 | | Net cash flows provided by (used in) investing activities | $1,714 | $(3,413) | | Net cash flows used in financing activities | $(3,504) | $(30,142) | | Increase in cash, cash equivalents and restricted cash | $78,360 | $40,312 | | Cash, cash equivalents and restricted cash, end of period | $152,218 | $73,858 | - Cash flow from operating activities increased in 2021 primarily due to timing of payments[234] - Investing activities in 2021 included $8.0 million from the sale of broadcasting assets, offsetting capital expenditures of $6.3 million[235] - Financing activities in 2021 included $825.0 million borrowed from 2028 Notes and $7.5 million from a PPP Loan, used to repay $855.2 million in outstanding debt[236] Notes to the Consolidated Financial Statements This section provides detailed notes on accounting policies, acquisitions, debt, income taxes, equity, and the impact of COVID-19 on operations and valuations - Urban One is an urban-oriented multi-media company with four reportable segments: radio broadcasting, Reach Media, digital, and cable television[371][374] - In 2021, the company acquired approximately $21.1 million in radio broadcasting licenses as part of an asset exchange with Audacy, Inc., and sold assets to Gateway Creative Broadcasting, Inc. for $8.0 million[448] - No impairment was recorded for goodwill or radio broadcasting licenses in 2021, following $84.4 million in impairment charges in 2020 due to the COVID-119 pandemic's impact on market revenue growth[451][452][456][457] - The company closed an offering of $825 million in 7.375% Senior Secured Notes due 2028, using proceeds to repay previous credit facilities and notes, and received a $7.5 million PPP Loan in 2021[487][488][493] - As of December 31, 2021, the company had federal and state NOL carryforwards of approximately $637.0 million and $410.2 million, respectively, with a valuation allowance of $264 thousand[544][546] - The company's Board authorized a new share repurchase program of up to $25 million for Class A and/or Class D common stock and a repurchase program for up to $50 million of its 2028 Senior Secured Notes on March 7, 2022[610] 1. Organization and Summary of Significant Accounting Policies Outlines the company's structure and key accounting principles applied in financial reporting 2. Acquisitions and Dispositions Details significant business acquisitions and asset dispositions during the reporting period 3. Property and Equipment Provides information on the company's tangible assets, including their carrying values and depreciation 4. Goodwill, Radio Broadcasting Licenses and Other Intangible Assets Discusses the company's intangible assets, including impairment testing and valuation 5. Content Assets Describes the company's content assets and related accounting policies 6. Investments Details the company's investments, including their nature and accounting treatment 7. Other Current Liabilities Lists and explains other short-term financial obligations of the company 8. Employment Agreement Award Provides details regarding awards and compensation under employment agreements 9. Long-Term Debt Outlines the company's long-term debt structure, covenants, and repayment schedules 10. Income Taxes Details the company's income tax provisions, deferred taxes, and unrecognized tax benefits 11. Stockholders' Equity Explains changes in stockholders' equity, including stock repurchases and stock-based compensation 12. Profit Sharing and Employee Savings Plan Describes the company's profit sharing and employee savings benefit plans 13. Commitments and Contingencies Details the company's contractual commitments and potential contingent liabilities 14. Quarterly Financial Data (Unaudited) Presents unaudited financial data for each quarter of the reporting period 15. Segment Information Provides financial data broken down by the company's operating segments 16. Subsequent Events Reports significant events that occurred after the balance sheet date Schedule II — Valuation and Qualifying Accounts Schedule II presents the changes in the allowance for doubtful accounts and the valuation allowance for deferred tax assets for the years ended December 31, 2021, and 2020. The allowance for doubtful accounts increased to $8,743 thousand in 2021, while the valuation allowance for deferred tax assets slightly decreased to $264 thousand Allowance for Doubtful Accounts (2021 vs. 2020) | Description | Balance at Beginning of Year (in thousands) | Additions Charged to Expense (in thousands) | Deductions (in thousands) | Balance at End of Year (in thousands) | | :-------------------------- | :---------------------------------------- | :---------------------------------------- | :------------------------ | :------------------------------------ | | 2021 | $7,956 | $1,584 | $797 | $8,743 | | 2020 | $7,416 | $1,394 | $854 | $7,956 | Valuation Allowance for Deferred Tax Assets (2021 vs. 2020) | Description | Balance at Beginning of Year (in thousands) | Additions Charged to Expense (in thousands) | Deductions (in thousands) | Balance at End of Year (in thousands) | | :------------------------------------ | :---------------------------------------- | :---------------------------------------- | :------------------------ | :------------------------------------ | | 2021 | $277 | $— | $13 | $264 | | 2020 | $249 | $28 | $— | $277 |